Makalot plans Vietnamese investment

BROADER BASE: The company said it wants to broaden its production base, while enabling its Vietnamese target to buy equipment to develop the yarn that it needs

By Camaron Kao / Staff reporter

Apparel maker Makalot Industrial Co (聚陽) yesterday said it plans to spend US$8.99 million to invest in yarn maker Tainan Spinning Co’s (台南紡織) subsidiary in Vietnam and acquire 50 percent of shares of the Vietnamese unit as it aims to take advantage of the US’ zero-tariff policy under the Trans-Pacific Partnership (TPP).

The company plans to spend US$4.49 million to acquire the 50 percent stake in Namtex Co Ltd, Makalot said, adding that it would inject the remaining amount of its investment to recapitalize the Vietnamese unit to US$22 million in 2017 from US$11 million this year.

The company said the share purchase is expected to increase yarn supplies for its clothes production, while the partnership shows the company’s ambition to broaden its production base in Southeast Asia.

“The vertical integration can help us benefit from the TPP agreement as Vietnam is likely to become one of the partnership’s members,” Makalot chairman Frank Chou (周理平) told reporters yesterday.

According to a report of Macquarie Capital Securities Ltd issued on Monday, the US may, under the TPP agreement, grant zero tariffs only to textile companies in accordance with the yarn-forward rule, which requires these companies to produce apparel from yarn to garment in TPP countries.

Tainan Spinning’s Vietnamese subsidiary will expand its capacity to produce 1.1 million to 1.2 million kilograms of cloth in 2015, from 700,000 to 800,000 kilograms this year, Makalot said.

“The deal will help strengthen our vertical integration from yarn production to garment making in Vietnam,” Tainan Spinning said in a filing to the Taiwan Stock Exchange yesterday.

Sales to Makalot account for 10 percent of revenue of Tainan Spinning’s Vietnamese subsidiary this year and the proportion will increase to 40 percent in 2015 and 50 percent in 2016, according to Makalot.

“With the deal, we can enable the Vietnamese company to purchase equipment to develop the yarn that we need,” Chou said.

Makalot will also increase its capacity in Vietnam to 7.2 million dozen clothes items in 2017 from 2.4 million dozen this year, as the company expands its total capacity to 22 million dozen in 2017 from 11 million dozen this year.

Meanwhile, Makalot posted record monthly revenue of NT$2.12 billion (US$71.75 million) last month, up 1.59 percent from NT$2.09 billion a year ago and up 35.03 percent from NT$1.57 billion a month ago, according to the company’s filing.

Makalot public relations manager Mavis Chiu (邱美惠) said the company ships most of its winter clothes in September every year and the company’s revenue next month will stay at the same level, because some of its orders were delayed.